Hopefully beginning of the end
Another 2.6m people filed for unemployment during the first week in May, bringing the total to 39m. It’s important to note not all of these people are still out of work – some have been called back in essential industries while others are returning to work in states that are starting to reopen.
Moral of the story: The weekly initial jobless claims are coming down from the 6.9m weekly high we saw a few weeks ago, but we’ve seen claims above 2m for 8 weeks straight. This compares to the ~200k range we were seeing prior to COVID-19. It does seem like things are starting to bottom as states begin reopening, evident by consumer sentiment that actually improved slightly in May, but it’s going to be a long road ahead as we try to recover from the ~20% unemployment levels we’re sitting at today.
Remember when we looked at March retail sales and knew April’s number was going to be much worse? We were, unfortunately, not wrong. Retail sales for April fell 16.4%, lower in every category except online shopping. To put things into perspective, this month’s decline was 4 times worse than the worst decline we saw in the last recession. March and April marked the worst back-to-back declines in retail sales we’ve seen since the government started tracking this data in 1967.
Moral of the story: One large caveat to this is that data collection was probably impacted by so many stores being closed. But if the stores are closed, I think we can rest assured that their sales weren’t looking too stellar anyway. As states begin reopening, we should see some sort of stabilization in the level of retail sales but one thing is abundantly clear – we are in a deep recession, folks.
The House Democrats passed another $3T coronavirus relief package Friday night. Republicans have opposed the bill so it has little chance of making it through the Senate in its current state. The bill includes almost $1T for state and local governments, a second round of direct payments for individuals and households, an extension of the federal unemployment benefits until January, and a host of other provisions the Democrats failed to successfully incorporate into the relief packages that have already been passed.
Moral of the story: Earlier in the week, Fed Chairman Powell actually encouraged Congress to do more to support the economy. But given it’s an election year, I wouldn’t be surprised if both parties are interested in garnering the good graces of their constituents and pass some form of another relief bill. Let’s see how this shakes out.